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Fiscal policies, public deficit retraints and European stabilization

Author

Listed:
  • Frédérique BEC

    (Université de Lille II and M.A.D, Université de Paris I)

  • Jean-Olivier Hairault

    (Université de Lille I (CEPE) and M.A.D., Université de Paris I)

Abstract

The ability of fiscal policies to smooth macroeconomic fluctuations under the constraints imposed by the Maastricht Treaty is at the heart of the current policy debate in Europe. A two-country intertemporal stochastic general equilibrium model is used in order to evaluate the efficiency of fiscal policy. First, it reveals the importance of the nature of the shocks hitting European countries: asymmetrical shocks actually strengthen the national fluctuations. Then, constraints on public deficit imposed by the Maastricht Treaty limit the ability of national governements to stabilize their economies. Furthermore, they can lead the European countries to adopt pro-cyclical budget rules.

Suggested Citation

  • Frédérique BEC & Jean-Olivier Hairault, 1996. "Fiscal policies, public deficit retraints and European stabilization," Discussion Papers (REL - Recherches Economiques de Louvain) 1996035, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:1996035
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    File URL: http://www.jstor.org/stable/40724131
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    More about this item

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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